Health 2.0 and Health Policy 0.2

I’ve been watching the health-care debate with depressed fascination. It’s fascinating because this is our government in action, and because I believe that we need to make significant changes to our healthcare system – both for health and for economic reasons. And I’m depressed because what we’re being offered is just such a bad deal.

It’s a bad deal for a large variety of reasons, but the core one is that it intends to control costs through managing health care finance and through centralized regulation (which is also how healthcare finance – your insurer – will be managing your costs).

That model doesn’t have a great track record, here or elsewhere.

The best way to manage costs, I believe, is to engage patients as consumers to better manage their care – a trend which is also deeply embedded in the newest thinking about how to practice medicine. Health 2.0 is, among other things, about empowering patients and embracing the hyperinformed patient as a partner in their treatment.

The health-care bills moving through Congress contain little to reward consumers for lowering their health costs, an omission prompting some lawmakers to press for more such incentives.

Sen. Ron Wyden (D., Ore.) is proposing amendments to the Senate bill that would give people who are eligible for coverage through their employer the option of buying cheaper coverage from the new insurance exchanges — and pocketing the difference.

A bipartisan coalition including Sens. Ron Wyden (D., Ore.), Evan Bayh (D., Ind.) and Susan Collins (R., Maine) wants to let consumers pocket the difference if they can find a health plan cheaper than the one their employer offers, WSJ’s Janet Adamy reports.

The legislation, without the amendments, opens up the exchanges only to small businesses and to people who don’t have insurance through an employer.

Mr. Wyden’s proposal is garnering support from an unusual mix of lawmakers and interest groups. Maine Republican Susan Collins, whom the White House is courting to support the bill, and Sen. Evan Bayh, an influential moderate Democrat from Indiana, have signed on to the idea.

The National Federation of Independent Business, a small-business group that is opposed to the broader Senate bill, also backs the amendments because they would make insurance more portable, which would help people who wanted to leave their jobs to do something entrepreneurial.

There are virtually no provisions in the Senate or House health bills that directly reward consumers for choosing cost-efficient care or lowering their medical costs through healthy behavior. Instead, the White House and top Democrats who drafted the health bills focused on giving doctors, hospitals and other health-care providers incentives for reducing unnecessary treatments.

Ideas like this seem like nothing but good ones; insurance that makes all medical treatment free to everyone will lead to overconsumption of healthcare, which will in turn lead to rationing through explicit policy or rationing through waiting – as we see in Canada and the UK.

How do we provide government services without letting the Treasury get looted or without intrusive (and expensive) command-and-control bureaucracies?

The idea of giving consumers more “skin in the game” when it comes to health costs has long been popular in some academic circles, especially among those who believe market forces can help solve the U.S. health-spending problem.

From my point of view, we have three healthcare problems in the US – 1) horrible access to healthcare for the poor and uninsured; 2) a structural cost problem caused by rising healthcare costs; and 3) a demographic cost problem as the population ages. Nothing in the current proposals does anything about 2) or 3) which means that while the current bills will broaden coverage, it is highly unlikely they will ‘bend the curve’ and begin to make healthcare more affordable in the overall economy.

Personally, I’d rather directly subsidize HSA’s and empower people to make more – and one hopes better – decisions. Think of it as a ‘negative income tax’ for healthcare…

“I’m very troubled that the Senate bill does not empower consumers more,” Ms. Collins said. “If they’re given information and financial incentives, they’ll make good decisions.”

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8 thoughts on “Health 2.0 and Health Policy 0.2”

Atul Gewande (general surgeon at Boston’s Brigham and Women’s hospital and associate professor at Harvard’s school of public health) has an “optimistic take”:http://www.newyorker.com/reporting/2009/12/14/091214fa_fact_gawande/ on the “pilot programs” contained in the health care bills. He draws an analogy to the problem of food production in the early 20th century. At that time food took a vastly disproportionate share of the family budget, just as health care is doing now. Food production costs were dramatically reduced, in part with the help of “pilot programs” embedded in federal legislation. The hope is that, although the health bills don’t tackle the cost issue head on, the “pilot programs” embedded in the bills will allow the private sector to come up with models that work–which can in turn be reinforced through government policy.

I agree with scrapping the current bill – an egregious example of the weaknesses of both our corrupt political system and rent-seeking businesses and special interests.

Interesting article. Some of the trial ideas may indeed be worthwhile. But his comparison fails for two reasons: The original ag agents _knew_ some things that would work – they’d been tried and succeeded elsewhere. And they could be adopted incrementally, one technique at a time and in one field. (Agriculture is a classic study area for innovation diffusion, BTW.) Second, the adoption was non-coercive, through example and persuasion.

Neither holds true in his comparison. We don’t have proof examples of cost savers / efficiency improvements that can be done in one step. (Sorry, I live in Kaiser Perm territory. There are far too many horror stories to hold it up as an example.) There’s good reason to believe that solutions will require systemic change. And certainly any bill that proposes to dragoon unwilling citizens into buying insurance under threat of law, and care givers to deliver services below cost, fails miserably at any claims to voluntarism.

There may be some good ideas in there, I don’t know. This could be a case where the ‘states as laboratories’ notion might work. If we’re not to get the benefit of a unified national insurance market, then at least take advantage of diversity. Put up liability shields, perhaps _temporary_ subsidies for some of the more promising notions, and see if anyone will sign on – either existing providers or new businesses.

We do know some things that will mitigate the cost increases – removing mandated coverages, reform of the most egregious tort abuses, and the aforementioned national market. Chances of those happening the current environment are about nil. Note that I said mitigate, not solve. We are still dealing with an incipient demographic upheaval, and a more quickly onrushing set of genomic innovations that are likely to give us diagnostic tools long in advance of any magic bullet cures (see this week’s isolation of cancer mutation points for an example). There’s plenty of reason for pessimism.

This bill has a horrific poison pill built in that (mark my words) will damage the current system so badly it will require a refit within 5 years. I don’t think this is unforeseen by the writers.

1.The penalty for not having insurance is a pittance (compared to the cost of insurance)
2.Catastrophic insurance will be outlawed. A ‘legal’ plan will require all kinds of (expensive) bells and whistles.
3.Preexisting conditions are out.

The result of this, what _has_ to be the result, is for young and healthy people to dump (or continue to opt out) of increasingly expensive insurance, and pick it up only when they get sick. In other words, this bill massively incentivizes exactly the ‘free rider’ problem everyone has been pointing to.

Why spend $2000 a year on insurance when you can pay a few hundred, wait until you get sick, and then buy it then? Its a no brainer!

And as we all know, healthy people jumping out of the pool while at the same time pushing millions of unhealthy (formerly unmeasurable) into the pool is a recipe for much higher premiums. Which is a recipe for congress to jump back in and (with utter gall) point the finger at the insurance companies for having the temerity to remain in business.

At that point, you almost have to go to some sort of single payer system just to keep the whole system from collapsing. I don’t think its tinfoil hatty to consider how bad of a dog this bill is and assume this Democratic leadership expects it to be only a starting off point for what they really intend.

To a degree, I have the same outlook on medical technology as Gewande does– to a degree. I do firmly believe that we can bring about a health care revolution of the same sort that we have seen with food production and are seeing with information technology. That’s something I’ve believed since the early 90’s– I thought of it as a sort of an existential bet with the medical research community that they could eventually start curing things faster than things would attack me.

It’s been gratifying, over the last nearly twenty years, to see that idea moving from complete lunacy to… if not mainstream, per se, at least something recognized as not insane. In the early 90’s, only engineers were seeing tidal changes through technology. Now, consumers see it when last year’s iPod has 8 GB memory, this year’s is 16, and assume next year’s is 32.

Still, I would be a lot more sanguine about this business if the Congress had not included a tax on medical devices– a tax on medical devices!!– as part of health care reform. That would be the more equivalent of following up Gewande’s anecdotes about increasing food production with a footnote saying, “And during all these programs, Congress also hiked the taxes on fertilizer and farm equipment.”

If we manage to get health care costs “under control” (as though there were some defined spending level that qualifies as “under control” anyway) it’ll be in spite of the bill, not because of it. My guess is that brazenly political stunts like that (the device tax is there as a payoff to the pharmaceutical companies) will just inhibit the medical breakthroughs we should be trying to foster.

I’m surprised that there’s not a big push for what’s a relatively simple idea that would help a lot of folks. Give all tax benefits for health coverage to the individual. Also, make the tax benefits independent of the cost of the plan you choose (as long as you choose some plan).

At present, the tax benefits (and much of the costs) of health insurance are taken (and paid) by employers. This causes several market distortions.

1) If I choose a more expensive insurance coverage, my total benefits package is more expensive than someone who chooses a cheaper package. This encourages employees to choose more expensive plans than they would choose if they were paying the full cost. It also means that employees effective total compensation changes based on what they’re willing to pay for health insurance, which doesn’t make any sense to me.

2) If I get laid off and have to buy insurance privately or through COBRA, I get no tax benefits. I can keep the plan my employer chose, but I have to pay the full cost. When I was employed, my employer got a tax benefit, but now that I’m unemployed, I get no tax benefit. How is that fair?

If we did this one thing, every person would have to decide how much they wanted to spend on health insurance. It would encourage people to choose less expensive plans that cover less and save the remaining money if they are young. When they’re older, they might choose a more expensive plan that covers more.

With a good HSA system (perhaps requiring that any excess tax benefit be put into an HSA), young people might save money year to year and be able to afford large bills when they happen right out of their HSA, rather than going bankrupt.

Also, if the tax benefit is high enough, it might be enough to buy a catastrophic plan even for low income folks. I’m not completely against some sort of subsidy, though I think we need to make it such that it’s a net benefit for someone to start working.